2. International Competitive Strategy
chapter thirteen
International Competitive Strategy
McGraw-Hill/Irwin
International Business, 11/e
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

3. Learning Objectives
Explain international strategy and competencies and international competitive advantage
Describe the steps in the global strategic planning process
Explain the purpose of mission statements, objectives, goals, and strategies

4. Learning Objectives
Describe the methods of and new directions in strategic planning
Explain home replication, multidomestic, regional, global, and transnational strategies and when to use them
Describe the sources of competitive information
Understand the importance of industrial espionage

5. International Strategy
The way firms make choices about acquiring and using scarce resources in order to achieve their international objectives
Involves decisions that deal with all the various functions, products and regional unit activities of a company

6. International Strategy
The goal is to achieve and maintain a unique and valuable position both within a nation and globally: competitive advantage
Competitive advantage is the ability of a company to have higher rates of profits than its competitors

7. Competitive Advantage
To create a sustainable competitive advantage, a company tries to develop skills that
Create value for customers
Are rare
Are difficult to imitate or substitute for
Are organized in a way that the company can fully exploit

8. Global Strategic Planning
Provides a means for top management to
Identify opportunities and threats
Formulate strategies to handle them
Stipulate how to finance and manage the strategies’ implementation
Provides consistency of action
Provides a thorough, systematic foundation for making decisions

9. Global Strategic Planning Process
The process of strategic planning provides a formal structure in which managers
Analyze the company’s external environments
Analyze the company’s internal environment
Quantify goals
Define the company’s business and mission
Set corporate objectives
Formulate strategies
Make tactical plans

10. Global Planning Process

11. Analyze Corporate Controllable Variables
Situational analysis
Forecast
Value Chain Analysis
Who are the target customers?
What value do we deliver?
How will customer value be created?
Figure 13.2

12. Figure 13.2 – The Value Chain

13. Analyze Corporate Controllable Variables
Knowledge as a Controllable Corporate Resource
Capabilities of employees
Structures, systems, organizational routines
Build knowledge database and transfer best practices
Protect knowledge from competitors

14. Define the Corporate Business, Vision, and Mission Statements
These broad statements communicate to the corporation’s stakeholders what the company is and where it is going and the values that will guide the behavior of the organization’s members
Mission statement
A broad statement that defines the organization’s purpose and scope

15. Define the Corporate Business, Vision, and Mission Statements
Vision Statement
Description of the company’s desired future position if it can acquire the necessary competencies and successfully implement its strategy
Values Statement
Clear and concise description of the fundamental values, beliefs, and priorities of the organization’s members

16. Set Corporate Objectives
Direct the firm’s course of action
Maintain it within the boundaries of the mission
Ensure its continuing existence
In order to implement an effective strategy, it is important to quantify objectives

17. Formulate Competitive Strategies
Action plans to enable organizations to reach their objectives
Generally, participants in the strategic planning process will formulate alternative competitive strategies along with action plans that seem plausible

18. Formulate Competitive Strategies
In the international market companies confront two opposing forces
Reduction of costs
Adaptation to local markets
Basic strategies address these pressures
Home Replication
Multidomestic
Regional
Global
Transnational

19. Cost and Adaptation Pressures and Their Implications for International Strategies

20. Home Replication Strategy
Used when companies typically centralize product development functions in their home country
Then transferred to foreign markets in order to capture additional value
Microsoft, McDonald’s

21. Multidomestic Strategy
Used when there is strong pressure for adaptation to local market
Decision making decentralized to allow for quick change
Increases cost structure
Too much adaptation may take away from product
Cost and complexity of coordination can be substantial
Schneider Electric

22. Global Strategy
Used when a company faces strong pressure to reduce costs and limited pressure to adapt products for local markets
Strategy and decision making centralized
Company offers standardized products and services
Value chain activities in only one or a few areas
Results in limited ability to adjust to meet customer needs and higher transportation costs
Intel, Boeing

23. Transnational Strategy
Used when a company confronts pressures for both cost effectiveness and local adaptation
Company locations based on where most beneficial for each activity
Upstream value chain activities will be more centralized
Downstream activities will be more decentralized
Achieving an optimal balance is challenging
Strategic decisions, structures and systems will be complex

24. Multiple, plausible stories about the future
Scenarios
Multiple, plausible stories about the future
Often the “what if” questions reveal weaknesses in present strategies
Types of subjects for scenarios include
large and sudden changes in sales (up or down)
sudden increases in price of raw materials
sudden tax increases
a change in the political party in power

25. Types of Plans Contingency Plans Tactical Plans (Operational)
Plans for the best-or-worst-case scenarios or for critical events that could have a severe impact on the firm
Tactical Plans (Operational)
Spell out in detail how objectives will be reached
Short-term

26. Strategic Plan Features
Sales Forecast and Budget
Sales Forecast
Provides management with an estimate of the revenue to be received and the units to be sold
Budget
During planning, budgets coordinate the functions within the firm and provide management with a detailed statement of future operating results

27. Plan Implementation Facilitators
Policies and Procedures
Policies
Broad guidelines to assist lower-level managers in handling recurring problems
Permit discretionary action and interpretation
The object is to economize managerial time and promote consistency among the various operating units

28. Plan Implementation Facilitators
Procedures
Prescribe how certain activities will be carried out
Ensure uniform action on the part of all corporate members
Facilitate comparison among operational units

29. Performance Measures
Assess if the strategy and its implementation are proceeding successfully and what modifications may be needed
Measures of the company’s success
Financial, technological, and human resources
Measures of the effectiveness
Measures of the company’s progress

30. Kinds of Strategic Plans
Time Horizon
Strategic plans may be classified as short, medium, or long term
Level in the Organization
Each organizational level will have its level of plan
Functional area

31. Top-down planning Methods of Planning
Begins at the highest level in the organization and continues downward
definition of the business
mission statement
company objectives
financial assumptions
content of the plan
special issues

32. Methods of Planning Bottom-Up Planning Iterative Planning
Begins at the lowest level in the organization and continues upward
Iterative Planning
Repetition of the bottom-up or top-down planning process until all differences are reconciled

33. New Directions in Planning
Who Does the Planning?
Many firms have introduced innovation to the planning process
Bring in customers and suppliers who have firsthand experience with the firm’s markets

34. New Directions in Planning
How Planning is Done
Many firms have moved toward less structured formats and much shorter documents
Contents of the Plan
Top managers much more concerned with issues, strategies, and implementation

35. Summary Changes in the International Planning Process
Top management must assume more explicit strategic decision-making role, decide how things ought to be, not listen to analyses of how they are
The nature of planning must change from forecasting to creativity
Planning processes and tools that assume a future much like the past must be replaced by a mind-set obsessed with recognizing change and using it to build competitive advantage

36. Summary of Changes in International Planning Process
The planner must change from purveyor of incrementalism to crusader for action
Strategic planning must be restored to core of line management responsibilities

37. Competitor Analysis Competitor Analysis Industrial Espionage
Process in which principal competitors are identified and their objectives, strengths, weaknesses, and product lines are assessed
Industrial Espionage
Act of spying on a competitors to learn secrets about strategy and operations

38. Competitor Intelligence Systems
Procedure for gathering, analyzing, and disseminating information about competitors
Benefits include ability to:
Improve bidding success
Identify competitor’s key customers
Identify plant or other facility expansion plans
Improve understanding of competitors’ products and processes

39. Sources of Information
Within the Firm
Sales representatives
Librarians
Technical and R&D people
Published Material
Technical journals
Databases
Internet
Industry reports
Public documents
Suppliers/Customers
Competitors’ Employees
Direct Observation or Analysis of Physical Evidence
Technical people
Reverse engineering

40. Benchmarking
A technique for measuring a firm’s performance against the performance of others

41. Benchmarking Four types
Internal: comparing one operation in the firm with another
Competitive: comparing the firm’s operation with a direct competitor
Functional: comparing similar functions of firms in your industry
Generic: comparing operations in totally unrelated industries